Low mortgage rates and more affordable home prices in some housing markets are creating renewed interest in homeownership, especially among young renters who are tired of seeing their rent costs rise every year. Homeownership can be a path to a solid financial future because each monthly mortgage payment will lead to increased home equity and rising home values will eventually add to your asset. However, potential buyers who are unprepared for the true cost of owning property may be shocked by the bite homeownership can take out of their wallet in addition to their mortgage payments.

Inspection and Appraisal FeesBefore you purchase a home, you need to pay for a home inspection, an appraisal and perhaps additional inspections for pests or radon. The costs of these inspections are borne by buyers and are a necessary protection to avoid buying a flawed property or paying too much.

Closing CostsSome buyers are able to negotiate with the seller for a contribution for these costs, but buyers need to be prepared with the cash for anywhere from 2% to 4% of the mortgage balance depending on your area.

TaxesAs a homeowner, you’ll need to pay property taxes, which are generally part of the escrow you pay into each month. Remember, even if you have a fixed-rate home loan, your property taxes could go up and increase your monthly housing costs.

InsuranceYour lender will require home insurance, which could be costly depending on a variety of factors including the construction materials of your home and the location. Even if you have renter’s insurance, you’ll find that home insurance costs more because you are paying for the ability to rebuild your home in addition to replacing your personal possessions. Insurance costs can also rise over time, and you may need supplemental insurance if you live in a flood or earthquake zone.

HOA and Condo FeesIf you buy a home within a homeowners’ association or a condominium association, you’ll be required to pay a monthly or quarterly fee. These fees can rise, or your association may need to charge a special assessment for projects such as repaving the parking lot or repairing a roof.

Moving CostsNot only will you need to pay a moving company or rent a truck to move your belongings, but you may need to make deposits to start your utilities.

The Bottom LineWhile buying a home may cost a little more than you think, the investment in property can still be worthwhile as long as you buy what you can afford, budget for expected and unexpected expenses and hold onto your home for at least seven to 10 years.

To check out my profile, references and the references of the other agents, just click on my picture to go to my profiles and read what our clients say about us. Pick the broker that you think is right for you. Of course I hope it’s me, but if not then best wishes!

Foreign Nationals are allowed to own real estate in the US. In fact, there are very few differences between a foreign and US buyer when purchasing real estate.

It is important that the Foreign Buyer understands the Buying Process and knows some basic information about general US real estate practices that may vary greatly from a buyer’s home country.

US Real Estate Practices

Transparency – In the US, real estate is very transparent. A new listing for sale is required to be posted to the listing service within 24 hours so that active listings are available to all agents. This is unlike in many other countries, where buyers have to go from agent to agent to find a property. We have access to all the listings in New York and Florida and can assist you in the sale of any one of them.

Commissions– The sales commission is always paid by the seller (and then divided equally between both the buyer’s and seller’s brokers), so buyers don’t pay anything to have a buyer’s agent working on their behalf. It is always advisable for a buyer to work with an Buyer’s Agent who will protect the buyer’s interests in the transaction.

Issues for Foreign Buyers:

Financing is Readily Available for Foreign Buyers

During the financial crisis, Foreign National financing dried up. However, over the last couple of years, banks have loosened their restrictions on Foreign National financing.

Most qualified Foreign Buyers can obtain financing for properties with a 40% down payment. Here are the terms of HSBC’s Foreign Buyer program as of Q2 2011:

$100,000 on deposit with the bank (if you withdraw the money after the closing the interest rate increases by 0.375%).

30% down payment (40% in Miami).

$1,500,000 loan limit, which translates to a property value of $2.142 million.

12 months’ reserves (mortgage payment, maintenance and taxes) are required to be on deposit (in addition to the $100,000 above).

HSBC offers 30-year and 15-year fixed rate mortgages.

Depending upon how long you think the holding period will be, you might want to go with an adjustable-rate mortgage that matches the holding period and has slightly lower rates.

While banks are offering loans to Foreign Buyers, they require a long-term relationship with the customer beyond just the mortgage. That is why they require as one of their terms that the buyer hold the $100,000 deposit with the bank.

While this is just one example of a Foreign National mortgage program, we have access to an array of mortgage brokers that suits the needs of a Foreign Buyer. Some of our mortgage broker contacts work with small banks that have very competitive terms and more flexibility than the big banks. Let us know if you want further information on this subject.

Foreign Buyers do not have to be in the US to Close the Deal

At the closing of the transaction, when the property is transferred to the new owner, the new owner does not need to be in the US. Rather, the new owner can provide his or her representative with “Power of Attorney” and the representative will have the right to close the deal on behalf of the new owner. This is quite common and convenient for the buyer who does not want to come back to the US for the closing.

Foreign Buyers Should Consult with Their Home Country Tax Specialists

A Foreign Buyer’s overall tax liability may be different than that of a US resident depending upon the buyer’s home country’s tax treaty with the US, if any. Therefore, it is best to consult a local tax advisor that is familiar with the tax treaty. For instance, the capital gains rate for US residents is 20% (if the property was owned for more than one year). Foreign Nationals, however, could be required to pay a higher rate, depending upon their home country’s tax treaty with the US and how they structure their purchase. A local tax lawyer who is familiar with your home country’s treaty would be the best resource for answers to these questions.

The US government allows Foreign Sellers to use Section 1031 of the IRS Code to defer capital gains taxes. The rules are quite complex and one must not stray from the rules, otherwise the transaction won’t qualify for deferral..

Foreign Buyer Must “Elect” to Pay US Income Taxes on Net Rental Income

The US government requires that the Foreign National “elect“ to pay US income taxes on any net income (rental revenues less expenses) derived from rental property. If this election is not made in a timely fashion (e.g., US income tax returns not filed), a tax of 30% of the gross rental income will be assessed. Under this scenario, the investor would not be able to deduct any expenses such as depreciation, interest, property taxes, common charges, etc. Even if the Foreign Investor is incurring tax losses in the beginning years of their investment, and, therefore, doesn’t owe any taxes to the government, they still must file their tax returns in a timely manner in order to make the election.

No Income Tax For the First 10 to 15 Years When Financing Real Estate Purchases

Foreign buyers who finance their purchases with a 40% to 50% down payment will likely not pay income taxes on the net rental income for the first 10 to 15 years, since the US government is very generous when it comes to those expenses that are allowed to be deducted from rental income. Since mortgage interest, common charges, property taxes, depreciation of the asset over 27.5 years, insurance, and amortization of closing costs are all deductions against income, in the early years the property will generate negative taxable income. In future years, when the apartment is generating taxable income, such income can be offset by the prior year’s negative taxable income (a.k.a. tax loss carry forward). This results in no income taxes for many years.

Foreign Investment in Real Estate Property Tax Act (FIRPTA)

When a non-resident sells US property, the Internal Revenue Service wants to be sure they get paid capital gains taxes. Accordingly, the IRS withholds 10% of the gross purchase price of the property. When a US tax return is submitted reporting the capital gains tax, if there is any refund due, that money will be refunded to the filer.

Foreign Buyers Must Plan for the US Estate Tax

When a Foreign Buyer dies, his or her estate will be taxed by the US government at close to 46%. This is easily avoided if the Foreign Buyer does some upfront planning. The planning involves setting up a Limited Liability Corporation (LLC) and a Foreign Corporation. The LLC would own the property, the Foreign Corporation would own the LLC, and the buyer would hold shares of stock in the Foreign Corporation. Under this scenario, since the property is “owned” by the Foreign Corporation, the US government would receive nothing upon the death of the Foreign Buyer. This is a great tax savings for Foreign Buyers and is not very expensive to implement. This structure also allows for the easy transfer of the property from one party to another by the selling of shares of the corporation rather than the sale of the property, which might trigger a taxable event.

It is advisable for any owner of investment real estate (foreign or US) to create at least an LLC to hold the property, since using this structure limits the owner’s liability to the value of the LLC, which would strategically own only that particular property and, therefore, the owner’s liability would be limited to the net value of the property. Taking this one step further, using a Foreign Corporation to own the LLC would provide protection to the Foreign Buyer against the estate tax.

If a Foreign Buyer does not want to maintain the LLC and the Foreign Corporation (perhaps because the investment is small), an alternative approach would be to obtain life insurance in the amount of equity in the property. For example, a 40-year-old man in good health would pay $350 per year for 20-year term life insurance paying a death benefit of $500,000. While the Foreign Buyer would not avoid the estate tax, his or her heirs would receive the same amount in the case of death.

Our team of real estate agents, attorneys and CPAs have in-depth knowledge about each of the issues facing Foreign Buyers. We are here to educate our Foreign Buyers on all of the consequences of a real estate purchase.

To check out my profile, references and the references of the other agents, just click on my picture to go to my profiles and read what our clients say about us. Pick the broker that you think is right for you. Of course I hope it’s me, but if not then best wishes!

To check out my profile, references and the references of the other agents, just click on my picture to go to my profiles and read what our clients say about us. Pick the broker that you think is right for you. Of course I hope it’s me, but if not then best wishes!

The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer’s credit approved. These lenders fund the mortgage loans which the Department insures. HUD does not make direct loans to help people buy homes.

The Section 203(k) program is the Department’s primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for expanding homeownership opportunities.

Many lenders have successfully used the Section 203(k) program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with state and local government agencies, have found ways to combine Section 203(k) with other financial resources, such as HUD’s HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers. Several state housing finance agencies have designed programs, specifically for use with Section 203(k) and some lenders have also used the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing.

The Department also believes that the Section 203(k) program is an excellent means for lenders to demonstrate their commitment to lending in lower income communities and to help meet their responsibilities under the Community Reinvestment Act (CRA). HUD is committed to increasing homeownership opportunities for families in these communities and Section 203(k) is an excellent product for use with CRA-type lending programs.

If you have questions about the 203(k) program or are interested in getting a 203(k) insured mortgage loan, we suggest that you contact an FHA-approved lender or the HUD Homeownership Center that serves your area.

Introduction

Section 10 1 (c) (1) of the Housing and Community Development Amendments of 1978 (Public Law 95557) amends Section 203(k) of the National Housing Act (NHA). The objective of the revision is to enable HUD to promote and facilitate the restoration and preservation of the Nation’s existing housing stock. The provisions of Section 203(k) are located in Chapter II of Title 24 of the Code of Federal Regulations under Section 203.50 and Sections 203.440 through 203.494. Program instructions are online in HUD Handbook 4240-4.

203(k) – How It Is Different

Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing for the rehabilitation; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point, the lender has a fully-insured mortgage loan.

Eligible Property

To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided the existing foundation system remains in place.

In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multi-unit dwelling could be decreased to a one- to four-family unit.

An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

A 203(k) mortgage may be originated on a “mixed use” residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

Condominium Unit

The Department also permits Section 203(k) mortgages to be used for individual units in condominium projects that have been approved by FHA.

The 203(k) program was not intended to be a project mortgage insurance program, as large scale development has considerably more risk than individual single-family mortgage insurance. Therefore, condominium rehabilitation is subject to the following conditions:

Owner/occupant and qualified non-profit borrowers only; no investors;

Rehabilitation is limited only to the interior of the unit.

Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehabilitation at any one time;

After rehabilitation is complete, the individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. However, this does not mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.

Example: A project might consist of six buildings each containing four units, for a total of 24 units in the project and, thus, be eligible for Section 203(k). Likewise, a project could contain a row of more than four attached townhouses and be eligible for Section 203(k) because HUD considers each townhouse as one structure, provided each unit is separated by a 1 1/2 hour firewall (from foundation up to the roof).

How the Program Can Be Used

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways:

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.

To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.

To refinance existing liens secured against the subject property and rehabilitate such a dwelling.

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.

To purchase a dwelling on another site, move it onto a new foundation and rehabilitate it, the mortgage must be a first lien on the property; however, loan proceeds for the moving of the house cannot be made available until the unit is attached to the new foundation.

Ineligible Improvements

Luxury improvements are not eligible.

Eligible Improvements

The homeowner can use the 203(k) program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements. All health, safety and energy conservation items must be addressed prior to completing general home improvements.

Required Improvements

All rehabilitation construction and/or additions financed with Section 203(k) mortgage proceeds must comply with the following:

A. Cost Effective Energy Conservation Standards

(1) Addition to existing structure. New construction must conform to local codes and HUD Minimum Property Standards in 24 CFR 200.926d.

(2) Rehabilitation of Existing Structure. To improve the thermal efficiency of the dwelling, the following are required:

a) Weather strip all doors and windows to reduce infiltration of air when existing weather stripping is inadequate or nonexistent.

b) Caulk or seal all openings, cracks or joints in the building envelope to reduce air infiltration.

c) Insulate all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation. Insulate ceiling areas where necessary

a) Heating, ventilating, and air conditioning system supply and return pipes and ducts must be insulated whenever they run through unconditioned spaces.

b) Heating systems, burners, and air conditioning systems must be carefully sized to be no greater than 15 percent oversized for the critical design, heating or cooling, except to satisfy the manufacturer’s next closest nominal size.

B. Smoke Detectors. Each sleeping area must be provided with a minimum of one (1) approved, listed and labeled smoke detector installed adjacent to the sleeping area.

Determining Upon One or Two Appraisal Reports

The appraiser must provide an opinion of the After-Improved value of the subject property, and in some cases, may be directed by the lender to provide the As-is value.

In those cases for which both As-is and After-improved values are required, the valuation analysis may consist of either one or two separate appraisal reports.

The number of appraisals depends on the complexity, scope and lender review of the proposed rehabilitation and nature of the work.

A. As-is Value. A separate appraisal (Uniform Residential Appraisal Report) may be required to determine the as-is value. However, the lender may determine that an as-is appraisal is not feasible or necessary. In this instance, the lender may use the contract sales price on a purchase transaction, or the existing debt on a refinance transaction, as the as-is value, when this does not exceed a reasonable estimate of value.

Further, on a refinance transaction, when a large amount of existing debt (i.e., first and second mortgages) suggests that the borrower has little or no equity in the property, the lender must obtain a current as-is appraisal on which to base the estimated as-is value.

On a refinance, the borrower may have substantial equity in the property to assure that no further down payment is required on the new loan amount. In some cases, the borrower will not have an existing mortgage on the property. In this case, the lender should obtain some comparables from a real estate agent/ broker to estimate an approximate as-is value of the property.

Another way of establishing the as-is value is to obtain a copy of the local jurisdiction tax valuation on the property.

B. Value After Rehabilitation. The expected market value of the property is determined upon completion of the proposed rehabilitation and/or improvements.

For a HUD-owned property an as-is appraisal is not required and a DE lender may request the HUD Field Office to release the outstanding HUD Property Disposition appraisal on the property to the lender to establish the maximum mortgage for the property. The HUD appraisal will be considered acceptable for use by the lender if: (1) it is not over one year old prior to bid acceptance from HUD; and (2) the sales contract price plus the cost of rehabilitation does not exceed 110 percent of the “As Repaired Value” shown on the HUD appraisal. If the HUD appraisal is insufficient, the DE Lender may order another appraisal to assure the market value of the property will be adequate to make the purchase of the property feasible. For a HUD-property, down payment for an owner-occupant or non-profit organization is 3.5% of the accepted bid price of the property and 100 percent financing on all other costs.

Recently Acquired Properties

Homebuyers who purchase a property with cash can refinance the property using 203(k) within six (6) months of purchase, the same as if the buyer purchased the property with a 203(k) insured loan to begin with. Evidence of interim financing is not required; the mortgage calculations will be done the same as a purchase transaction. Cash back will be allowed to the borrower in this situation less any down payment and closing cost requirement for the 203(k) loan. A copy of the Sales Contract and the HUD-1 Settlement Statement must be submitted to verify the accepted bid price (as-is value) of the property and the closing date.

Architectural Exhibits

The improvements must comply with HUD’s Minimum Property Standards (24 CFR 200.926d and/or HUD Handbook 4905.1) and all local codes and ordinances. The homebuyer may decide to employ an architect or a consultant to prepare the proposal. The homebuyer must provide the lender with the appropriate architectural exhibits that clearly show the scope of work to be accomplished. The following list of exhibits are recommended, but may be modified by the jurisdictional HUD office as required.

A. A Plot Plan of the Site is required only if a new addition is being made to the existing structure. Show the location of the structure(s), walks, drives, streets, and other relevant details. Include finished grade elevations at the property corners and building corners. Show the required flood elevation.

B. Proposed Interior Plan of the Dwelling. Show where structural or planning changes are contemplated, including an addition to the dwelling. (An existing plan is no longer required.)

C. Work Write-up and Cost Estimate. Any format may be used for these documents, however, quantity and the cost of each item must be shown. Also include a complete description of the work for each item (where necessary). The Rehabilitation Checklist in Appendix 1 of Handbook 4240.4 REV-2 should be used to ensure all work items are considered. Transfer the costs to the Draw Request (form HUD-9746-A).

Cost estimates must include labor and materials sufficient to complete the work by a contractor. Homebuyers doing their own work cannot eliminate the cost estimate for labor, because if they cannot complete the work there must be sufficient money in the escrow account to get a subcontractor to do the work. The Work Write-up does not need to reflect the color or specific model numbers of appliances, bathroom fixtures, carpeting, etc., unless they are nonstandard units.

The consultant who prepares the work write-up and cost estimate (or an architect, engineering or home inspection service) needs to inspect the property to assure: (1) there are no rodents, dry rot, termites and other infestation; (2) there are no defects that will affect the health and safety of the occupants; (3) the adequacy of the existing structural, heating, plumbing, electrical and roofing systems; and (4) the upgrading of thermal protection (where necessary).

As detailed in Mortgagee Letter 1995-40, the Consultant must be able to prepare the work write-up and cost estimate without using contractor bids. It is important for the Consultant to use cost estimates that are reasonable for the area where the property is located. If contractor bids come in higher than the cost estimates, the Consultant will need to discuss this situation with the borrower and the lender to reconcile the differences and to determine if the proposed repair escrow account may be too low to complete the job. At that point, if the Consultant agrees with the higher costs, an adjusted work write-up with supporting documentation is required to be submitted to the lender for consideration.

The work write-up and cost estimate are not required to match the contractor bids dollar-per-dollar. However, the work write-up and cost estimate are to be compared to confirm that all improvements/repairs have been addressed and to confirm the current market costs of materials and labor for the project.

Definitions for Use in the 203(k) Program

A. Insurance of Advances. This refers to insurance of the 203(k) mortgage prior to the rehabilitation period. A mortgage that is a first lien on the property is eligible to be endorsed for insurance following mortgage loan closing, disbursement of the mortgage proceeds, and establishment of the Rehabilitation Escrow Account.

The mortgage amount may include funds for the purchase of the property or the refinance of existing indebtedness, the costs incidental to closing the transaction, and the completion of the proposed rehabilitation. The mortgage proceeds allocated for the rehabilitation will be escrowed at closing in a Rehabilitation Escrow Account.

B. Rehabilitation Escrow Account. When the loan is closed, the proceeds designated for the rehabilitation or improvement, including the contingency reserve, are to be placed in an interest bearing escrow account insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). This account is not an escrow for the paying of real estate taxes, insurance premiums, delinquent notes, ground rents or assessments, and is not to be treated as such. The net income earned by the Rehabilitation Escrow Account must be paid to the mortgagor. The method of such payment is subject to agreement between mortgagor and mortgagee. The lender (or its agent) will release escrowed funds upon completion of the proposed rehabilitation in accordance with the Work Write-Up and the Draw Request (Form HUD-9746,A).

C. Inspections. Performed by HUD-approved consultants/inspectors or HUD-accepted staff of the DE lender. The consultant is to use the architectural exhibits in order to make a determination of compliance or non-compliance. When the inspection is scheduled with a payment, the inspector is to indicate whether or not the work has been completed. Also, the inspector is to use the Draw Request form (Form HUD-9746-A). The first draw must not be scheduled until the lender has determined that the applicable building permits have been issued.

D. Holdback. A ten (10) percent holdback is required on each release from the Rehabilitation Escrow Account. The total of all holdbacks may be released only after a final inspection of the rehabilitation and issuance of the Final Release Notice. The lender (or its agent) may retain the holdback for a maximum of 35 calendar days, or the time period required by law to file a lien, whichever is longer, to ensure that no liens are placed on the property.

E. Contingency Reserve. At the discretion of the HUD Field Office, the cost estimate may include a contingency reserve if the existing construction is less than 30 years old, or the nature of the work is complex or extensive. For properties older than 30 years, the cost estimate must include a contingency reserve of a minimum of ten (10) percent of the cost of rehabilitation; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If the utilities were not turned on for inspection, a minimum fifteen (15) percent is required. If the scope of work is well defined and uncomplicated, and the rehabilitation cost is less than $7500, the lender may waive the requirement for a contingency reserve.

The contingency reserve account can be used by the borrower to make additional improvements to the dwelling. A Request for Change Letter must be submitted with the applicable cost estimates. However, the change can only be accepted when the lender determines: (1) It is unlikely that any deficiency that may affect the health and safety of the property will be discovered; and (2) the mortgage will not exceed the appraised value of the property less the statutory investment requirement. If the mortgage exceeds the appraised value less the statutory investment, then the contingency reserve must be paid down on the mortgage principal. If a borrower feels that the contingency reserve will not be used and he wishes to avoid having the reserve applied to reduce the mortgage balance after issuance of the Final Release Notice, the borrower may place his own funds into the contingency reserve account. In this case, if monies are remaining in the account after the Final Release Notice is issued, the monies may be released back to the borrower.

If the mortgage is at the maximum mortgage limit for the area or for the particular type of transaction, but a contingency reserve is necessary, the contingency reserve must be placed into an escrow account from other funds of the borrower at closing. Under these circumstances, if the contingency reserve is not used, the remaining funds in the escrow account will be released to the borrower after the Final Release Notice has been issued.

F. Mortgage Payment Reserve. Funds not to exceed the amount of six (6) mortgage payments (including the mortgage insurance premium) can be included in the cost of rehabilitation to assist a mortgagor when the property is not habitable during rehabilitation. The number of mortgage payments cannot exceed the completion time frame required in the Rehabilitation Loan Agreement. The lender must make the monthly mortgage payments directly from the interest bearing reserve account. Monies remaining in the reserve account after the Final Release Notice must be applied to the mortgage principal.

G. Approval of Non-Profit Agencies. A non-profit agency, before it can be approved as an eligible mortgagor and obtain the same mortgage amount as available to owner-occupants on Section 203(k) mortgages, must demonstrate its experience as a housing provider to HUD and meet all other requirements described in HUD Handbook 4155.1 REV-4, paragraphs 1-5. It must also be able to provide satisfactory evidence that it has the financial capacity to purchase the properties.

Maximum Mortgage Amount

The mortgage amount, when added to any other existing indebtedness against the property, cannot exceed the applicable loan-to-value ratio and maximum dollar amount limitations prescribed for similar properties under Section 203(b). The down payment requirements are the same as under the Section 203(b) program. The Mortgage Payment Reserve is considered a part of the cost of rehabilitation for determining the maximum mortgage amount. Also refer to the requirements for incentives to acquire HUD-owned properties.

The form HUD-92700 (Maximum Mortgage Worksheet) must be used to determine the maximum mortgage amount.

A. Maximum Mortgage Calculation

REFINANCE:

Based on the lesser of:

1) The existing debt on the property before rehabilitation, plus the estimated cost of rehabilitation and allowable closing costs or

2) The lesser of the As-Is value plus rehabilitation costs or 110 percent of the After-Improved value multiplied by the appropriate LTV factor.

NOTE: If the property was owned less than one year, the acquisition cost plus the documented rehabilitation costs must be used. If the property is a condominium, the after-improved value is limited to 100% for refinance and purchase transactions.

PURCHASE:

The maximum mortgage amount is based on the lesser of 1) or 2) of the below multiplied by the appropriate LTV factor.

1) The as-is value or the purchase price of the property before rehabilitation, whichever is less, plus the estimated cost of rehabilitation or

2) 110 percent of the after-improved value of the property.

Principal Residence (Owner-Occupant) & HUD Approved Non-Profit Organization. For purchases with 203(k) financing: the maximum mortgage amount is to be based upon the HUD estimate of value in 1) or 2) above, less the statutory investment requirement. For refinances under the 203(k) program: the maximum mortgage amount is to be based upon 97/95/90 percent of the HUD estimate of value in 1) or 2) above.

B. Cost of Rehabilitation. Expenses eligible to be included in the cost of rehabilitation are materials, labor, contingency reserve, overhead and construction profit, up to six (6) months of mortgage payments, plus expenses related to the rehabilitation such as permits, fees, inspection fees by a qualified home inspector, licenses and consultant and/or architectural/engineering fees. The cost of rehabilitation may also include the supplemental origination fee which the mortgagor is permitted to pay when the mortgage involves insurance of advances, and the discounts which the mortgagor will pay on that portion of the mortgage proceeds allocated to the rehabilitation.

C. Exemption of the Market Value Limitation. The 203(k) regulations allow for a waiver request of the market value limitation, which allows the appraiser to go outside the targeted area to obtain the value of comparable properties. Such requests must be forwarded to the Assistant Secretary of Housing-Federal Housing Commissioner at the HUD Headquarters.

Requests must include documentation that the following conditions are present:

1) The property is located within an area which is subject to a community sponsored program of concentrated redevelopment or revitalization (See 24 CFR Part 220).

2) The market value loan limitation prevents the use of the program to accomplish rehabilitation in the subject area.

3) The interests of the borrower and the Secretary of HUD are adequately protected.

D. Solar Energy Increase. The mortgage is eligible for an increase of up to 20 percent in the maximum insurable mortgage amount if such an increase is necessary for the installation of solar energy equipment.

The solar energy system’s contribution to value will be limited by its replacement cost or by its effect on the value of the dwelling.

E. Energy Efficient Mortgage Program. Under the FHA EEM Program, a borrower can finance into the mortgage 100 percent of the cost of eligible energy efficient improvements, subject to certain dollar limitations, without an appraisal of the energy improvements and without further credit qualification of the borrower. To be eligible for inclusion into the mortgage, the energy efficient improvements must be “cost effective,” i.e., the total cost of the improvements (including maintenance costs) must be less than the total present value of the energy saved over the useful life of the improvements.

Seven Unit Limitation

HUD regulations and policies state that a real estate owner/entity should not be allowed to rapidly accumulate FHA insured properties that clearly and collectively constitute a multifamily project. In general, a borrower may not have an interest in more than seven rental units (FHA, VA, conventional or owned free and clear of any mortgage) in the same subdivision or contiguous area. For 203(k) purposes, HUD defines a contiguous area as within a two block radius.

The seven unit limitation does not apply if (1) the neighborhood has been targeted by a State or local government for redevelopment or revitalization; and (2) the State or local government has submitted a plan to HUD that defines the area, extent and type of commitment to redevelop the area. A restriction may still be imposed (by HUD) within a redevelopment area (or sub-area) in order to prevent undesirable concentrations of units under a single (or group) ownership. H U D will determine that the seven unit limit is inapplicable only if: (1) the real estate owner/entity will own no more than 10 percent of the housing units (regardless of financing type) in the designated redevelopment area or sub-area; and (2) the real estate owner/entity has no more than eight units on adjacent lots.

Interest Rate and Discount Points

These are not regulated and are negotiable between the borrower and the lender. The amortization of the loan will be for 30 years; however, provisions of the Section 203(k) mortgage (described in Section 203.21 of the Regulations) are the same as prescribed under Section 203(b).

Discount Points on Repair Costs and Fees

Discount points the borrower pays on the rehabilitation portion of the mortgage proceeds are allowable rehabilitation costs.

Maximum Charges and Fees

The statutory requirements and administrative policies of Section 203(k) result in deviations from the maximum amount of charges and fees permitted under Section 203(b).

A. Supplemental Origination Fee. When the Section 203(k) mortgage involves insurance of advances, the lender may collect from the mortgagor a supplemental origination fee. This fee is calculated as one and one-half percent (1-1/2%) of the portion of the mortgage allocated to the rehabilitation or $350, whichever is greater. This supplemental origination fee is collected in addition to the one percent origination fee on the total mortgage amount.

B. Independent Consultant Fee. A borrower can have an independent consultant prepare the required architectural exhibits. A borrower can also use a contractor to prepare the construction exhibits or prepare the exhibits themselves. The use of a consultant is not required; however, the borrower should consider using this service in order to expedite the processing of the 203(k) loan. When a consultant is used, HUD does not warrant the competence of the consultant or the quality of the work the consultant may perform for the borrower.

The consultant must enter into a written agreement with the borrower that completely explains what services the consultant will perform for the borrower and the fee charged. The fee charged by the consultant can be included in the mortgage. A fee of $400 is acceptable for a property with repairs less than $7,500; $500 for repairs between $7,501 and $15,000; $600 for repairs between $ 15,001 and $ 30,000; and $ 700 for repairs between $30,001 and $50,000; $800 for repairs between $50,001 and $75,000; $900 for repairs between $75,001 and $100,000; and $ 1,000 for repairs over $100,000. An additional fee of $25 can be charged for each additional unit in the property under the same FHA case number. For this fee, the consultant would inspect the property and provide all the required architectural exhibits. State licensed architect or engineer fees are not restricted by this fee schedule. The architect and engineer fees must be customary and reasonable for the type of project.)

C. Fee Consultant. Prior to the appraisal, a HUD-accepted fee consultant must visit the site to ensure compliance with program requirements. The utilities must be on for this site review to take place. The fee is as follows and may not be changed without HUD Headquarters approval:

1) Initial review prior to appraisal:

Cost of Repairs/Fee: <$15,000=$100.00, >$15,001 but less than or equal to<$30,000=$150.00, >$30,001=$200.00

2) Additional unit review (two to four units with same casenumber)-$50.00/unit.

3) Additional review (reinspection of the same unit)-$50.00. When travel distance exceeds 30 miles round trip from the reviewer’s place of business, a mileage charge (established by HUD Field Office) may be applied to the above charges, including toll road and other charges where applicable.D. Appraisal Fee. The lender may charge a borrower no more than the actual amount the lender pays the appraiser, whether the appraiser is on the lender’s staff, or external to the organization. The lender may include the appraisal fee in the closing costs.

E. Inspection Fee (during the rehabilitation construction period). Established by the local HUD Field Office.

(1) Fees for a maximum of five draw inspections will be allowed for inclusion in the cost of rehabilitation. If all inspections are not required, remaining funds will be applied to the principal after the Final Release Notice is issued.

(2) If additional inspections are required by the lender to ensure satisfactory compliance with exhibits, the borrower or contractor will be responsible for payment; however, the lender has ultimate responsibility.

F. Title Update Fee. To protect the validity of the mortgage position from mechanic’s liens on the property, reasonable fees charged by a title company may be included as an allowable cost of rehabilitation. When the mortgage position is protected and is not in jeopardy, this fee may not apply Borrowers may wish to obtain lien protection, but the fees must be paid by the borrower where such lien protection is not required to ensure the validity of the security instrument. The allowable fee should not exceed $50.00 per draw release. If all draw inspections are not made, monies left in escrow must be applied to reduce the mortgage balance.

Application Process

This describes a typical step-by-step application/mortgage origination process for a transaction involving the purchase and rehabilitation of a property. It explains the role of HUD, the mortgage lender, the contractor, the borrower, consultant, the plan reviewer, appraiser and the inspector.

A. Homebuyer Locates the Property.

B. Preliminary Feasibility Analysis. After the property is located, the homebuyer and their real estate professional should make a marketability analysis prior to signing the sales contract. The following should be determined:

1) The extent of the rehabilitation work required;

2) Rough cost estimate of the work; and

3) The expected market value of the property after completion of the work. Note: The borrower does not want to spend money for appraisals and repair specifications (plans), then discover that the value of the property will be less than the purchase price (or existing indebtedness), plus the cost of improvements.

C. Sales Contract is Executed. A provision should be included in the sales contract that the buyer has applied for Section 203(k) financing, and that the contract is contingent upon loan approval and buyer’s acceptance of additional required improvements as determined by HUD or the lender.

F. Lender Requests HUD Case Number. Upon acceptance of the architectural exhibits, the lender requests the assignment of a HUD case number, the plan reviewer, appraiser, and the inspector.

G. Fee Consultant Visits Property. The homebuyer and contractor (where applicable) meet with the fee consultant to ensure that the architectural exhibits are acceptable and that all program requirements have been properly shown on the exhibits.

H. Appraiser Performs the Appraisal.

I. Lender Reviews the Application The appraisal is reviewed to determine the maximum insurable mortgage amount for the property

J. Issuance of Conditional Commitment/Statement of Appraised Value. This is issued by the lender and establishes the maximum insurable mortgage amount for the property.

K. Lender Prepares Firm Commitment Application. The borrower provides information for the lender to request a credit report, verifications of employment and deposits, and any other source documents needed to establish the ability of the borrower to repay the mortgage.

L. Lender Issues Firm Commitment. If the application is found acceptable, the firm commitment is issued to the borrower. It states the maximum mortgage amount that HUD will insure for the borrower and the property.

M. Mortgage Loan Closing. After issuance of the firm commitment, the lender prepares for the closing of the mortgage. This includes the preparation of the Rehabilitation Loan Agreement. The Agreement is executed by the borrower and the lender in order to establish the conditions under which the lender will release funds from the Rehabilitation Escrow Account. Following closing, the borrower is required to begin making mortgage payments on the entire principal amount for the mortgage, including the amount in the Rehabilitation Escrow Account that has not yet been disbursed.

N. Mortgage Insurance Endorsement. Following loan closing, the lender submits copies of the mortgage documents to the HUD office for mortgage insurance endorsement. HUD reviews the submission and, if found acceptable, issues a Mortgage Insurance Certificate to the lender.

O. Rehabilitation Construction Begins. At loan closing, the mortgage proceeds will be disbursed to pay off the seller of the existing property and the Rehabilitation Escrow Account will be established. Construction may begin. The homeowner has up to six (6) months to complete the work depending on the extent of work to be completed. (Lenders may require less than six months.)

P. Releases from Rehabilitation Escrow Account. As construction progresses, funds are released after the work is inspected by a HUD-approved inspector. A maximum of four draw inspections plus a final inspection are allowed. The inspector reviews the Draw Request (form HUD-9746-A) that is prepared by the borrower and contractor. If the cost of rehabilitation exceeds $10,000, additional draw inspections are authorized provided the lender and borrower agree in writing and the number of draw inspections is shown on form HUD-92700, 203(k) Maximum Mortgage Worksheet.

Q. Completion of Work/Final Inspection. When all work is complete according to the approved architectural exhibits and change orders, the borrower provides a letter indicating that all work is satisfactorily complete and ready for final inspection. If the HUD-approved inspector agrees, the final draw may be released, minus the required 10 percent holdback. If there is an unused contingency fund or mortgage payment reserves in the account, the lender must apply the funds to prepay the mortgage principal.

More info go to http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203kabou

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Dismiss VA home loan myths about the federally-backed, zero down loan program.

Myth #1 – VA purchase loans are not for short-sale or foreclosed real estateMyth #2 – Surviving spouses don’t qualify for VA mortgagesMyth #3 – Military members deployed overseas can’t get a VA-guaranteed loan.Myth #4 – All realtors are good VA home loan advisorsMyth #5 – VA loans take forever to close

Fact #1: VA home loans can be used to purchase foreclosed and short-sale with as little as no money down. VA-eligible borrowers may have an advantage over those who need up to 20% cash down to qualify for conventional loans. A VA appraiser is trained to certify value and safety and can spot red flags of distressed properties.

Fact #2: Veterans, active duty and certain surviving spouses are eligible for VA home loan benefits. Qualified surviving spouses may borrow up to $417,000 (more in high-cost counties) with no money down. And, surviving spouses are exempt from paying the VA funding fee.

Fact #3: Military members deployed overseas can sign a document called power of attorney or (POA) designating a spouse or someone else to act as on their behalf for a VA loan transaction. The POA grants permission for the attorney in fact to sign on behalf of the VA-eligible borrower. The service member must give intent to obtain a VA loan through an email, letter or other correspondence. Only a spouse can satisfy the occupancy rule (move in within 60 days of closing) in a deployed serviceperson’s stead. Otherwise, the borrower serving away from home will be granted an extension of up to 12 months to occupy the home.

Fact #4: A VA certification for real estate agents does not exist. Therefore, a real estate agent should not be used as a reliable source for VA loan information. Real estate agents who are not well-informed about VA loans can even unintentionally dissuade VA-eligible borrowers from choosing the program which may be best for them. A VA specialty lender, one whose majority product is VA-backed loans, can provide reliable VA loan facts.

Fact #5: If a lender is specialized in VA home loans, then closing can often happen within 30 days. The VA-approved lender is given flexibility to decide on its own whether a borrower is a satisfactory credit risk. Even a borrower with extenuating circumstances may close quickly.

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Like marriage, home-buying is one part love, one part legal transaction, and it starts with a proposal. When you’re ready to buy a home, you need to make a written offer: Oral promises are not legally enforceable in real estate sales.

Realtors usually have a variety of standard forms (including Residential Purchase Agreements) that are kept up to date with the changing laws. In many states, sellers must comply with certain disclosure, and a Realtor will ensure that they do, as well as answering any questions you may have during the sale.

If you are not working with a Realtor, keep in mind that your purchase offer or contract must conform to state and local laws. State laws vary, and certain provisions may be required in your area.

Besides addressing legal requirements, the proposal should specify price and all other terms and conditions of the purchase. For example, if the sellers said they’d help with $2,000 toward your closing costs, include that in your written offer and in the final contract, or you won’t have grounds for collecting it later.

After the offer is drawn up and signed, it will usually be presented to the seller by your Realtor, by the seller’s Realtor if that’s a different agent, or often by the two together. In a few areas, sales contracts are typically drawn up by the parties’ lawyers.

What to Include in a Home Offer
Your purchase offer, if accepted as it stands, will become a binding sales contract, also known as a purchase agreement, an earnest money agreement or a deposit receipt. It’s important, therefore, that the offer contain every element needed to serve as a blueprint for the final sale. These purchase offer should include such things as:

Address and sometimes a legal description of the property

Sale price. Terms. For example, this is an all-cash transaction, or the deal is subject to you obtaining a mortgage for a given amount.

Seller’s promise to provide clear title (ownership).

Target date for closing (the actual sale).

Amount of earnest money deposit accompanying the offer; whether it’s a check, cash or a promissory note; and how the earnest money will be returned to you if the offer is rejected — or kept as damages if you back out of the deal for no good reason.

Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller.

Provisions about who will pay for title insurance, survey, termite inspections and the like.

Type of deed that will be granted.

Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses.

A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing.

A time limit (preferably short) after which the offer will expire.

Contingencies. These are extremely important matter and discussed in detail below.

Contingencies
If your proposal says “This offer is contingent upon (or subject to) a certain event,” you’re saying that you will go through with the purchase only if that event occurs. The following are two common contingencies contained in a purchase offer:

Financing. You the buyer must be able to get specific financing from a lending institution. If you can’t secure the loan, you will not be bound by the contract.
Home inspection. The property must get a satisfactory report by a home inspector “within 10 days after acceptance of the offer” (for example). The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure that all inspection conditions are detailed in the written contract.

Negotiating the Price
Is the listed price the right price? A Realtor can give you a Comparative Market Analysis (CMA) of the home’s value, or you can check local listings on realtor.com to see what similar properties sold for. Based on the home inspection, you might also ask for a lower price or repair contingencies if the home needs fixes.

You’re in a strong bargaining position — meaning you look particularly welcome to a seller — if you:

Are an all-cash buyer.
Are pre-approved for a mortgage.
Don’t have a house that must be sold before you can afford to buy.

In those circumstances, you may be able to negotiate discounts from the listed price. On the other hand, in a hot seller’s market, if the perfect house comes on the market, you may want to offer the full list price (or more) to beat out other early offers.

It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep these considerations in mind:

Every month a vacant house remains unsold represents considerable expense for the seller.
If the sellers are divorcing, they may just want out quickly.
Estate sales often yield a bargain in return for a prompt deal.

Earnest Money
Earnest money is a deposit that you put down with your offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show good faith. A Realtor or an attorney usually holds the deposit. The amount varies from community to community, and it becomes part of your down payment.

Buyers: The Seller’s Response to Your Offer
You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that. The seller cannot change their mind later and hold you to the deal.

If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you may receive a written counteroffer with the seller’s preferred changes. You can accept or reject it or to even make your own counteroffer — for example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”

Each time either party makes any change in the terms, the other side is free to accept or reject the offer or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.

Buyers: Withdrawing an Offer
Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, in some cases even if you haven’t yet been notified of acceptance. If you want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest money deposit or get sued for damages the seller may have suffered by relying on your actions.

Sellers: Calculating Net Proceeds
When an offer comes in, you can accept it exactly as it stands, refuse it (seldom a useful response), or make a counteroffer with the changes you want. In evaluating a purchase offer, you should estimate the amount of cash you’ll walk away with when the transaction is complete. For example, when you’re presented with two offers at once, you may discover you’re better off accepting the one with the lower sale price if the other asks you to pay points to the buyer’s lending institution. Once you have a specific proposal before you, calculating net proceeds becomes simple. From the proposed purchase price you subtract:

Your present mortgage lender may maintain an escrow account into which you deposit money to pay property tax bills and home owner’s insurance premiums. In that case, remember that you will receive a refund of money left in that account, which will add to your proceeds.

Sellers: Counteroffers
When you receive a purchase offer from a would-be buyer, remember that unless you accept it exactly as it stands, unconditionally, the buyer will be free to walk away. Any change you make in a counteroffer puts you at risk of losing that chance to sell. Who pays for what items is often determined by local custom. You can, however, arrive at any agreement you and the buyers want about who pays for the following:

You may feel some of these costs are not your responsibility, but many buyers — particularly first-timers — are short of cash. Helping them may be the best way to get your home sold.

Whether you’re buying or selling, make sure your Realtor and/or your attorney evaluates all terms in the offer and counteroffers. As soon as both parties accept the written offer, you have a legal contract. ***FROM Realtor.com

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Here are some tips on how sellers can best position themselves to get multiple offers, and how buyers can best position themselves to get the house of their dreams.

For Sellers:

Spruce Up. It helps tremendously if the home is move in ready. Repainting the inside, repainting the front steps, power washing the outside, and cutting the bushes back is definitely worth the effort.

Take professional Pictures! Do not take the pictures with a camera phone and try to slide by… Do NOT take just a couple… The MLS lets you post over 20, why would you give just 1 picture taking from the county records? Laziness! Get another realtor, your realtor should give 1000% like their hair is on fire! Take enough to spark interest!

Build up excitement. Leak the word out in the neighborhood that you might be putting the house on the market. Then list the house on a Monday with no showings until Friday to generate interest to see what the home has to offer.

Use An Experienced Agent. Do not get emotional when offers come in, it is a business transaction of your most precious object, your home. The goal is to net as much as you can in the shortest amount of time. The longer your home sits on the market the “staleness” sets in and you lose negotiating leverage. Read the contracts thoroughly, and take note of contingencies!

For Buyers:

Put down a big deposit. The deposit, or earnest money, can speak volumes. The more earnest money you put down, the more serious you appear to the seller.

Limit contingencies. If a buyer demands too many contingencies, that can decrease the appeal of the offer.

If there’s no financing, buyers can waive the right to an appraisal (typically a house has to appraise at or above the purchase price in the contract). I have even seen buyers bring a home inspector or contractor with them to a first or second showing to look at structural issues and help the buyer make a fast decision, without a home inspection contingency.

You’ve negotiated a successful offer, resolved all the inspections items, and have received your Clear To Close. You are so close to ownership that you can feel the new keys in your hand. The only thing standing between you and moving into your new home is the closing table.
The following is Frequently Asked Questions about What Happens at a Closing in Florida…

WHAT IS CLOSING?

Closing (also called settlement) is the legal transfer of property ownership. Usually, but not always, possession is transferred at closing.

WHO ATTENDS CLOSINGS?

Face-to-face closings are common in most states, although Florida does not require them. Your Realtor can provide details for your situation. Since Florida has many Foreign Buyers and Sellers, you have the option of doing a “Mail Away”.
The participants usually include:• You, the buyer.• The seller.• The real estate agents representing the buyer(s)and seller(s).• The closing agent, the title insurance representative, and the escrow agent. Often one person fulfills all three roles, coordinating and recording the exchange of the documents and money, disbursing funds, and handling various closing details.

WHERE IS CLOSING HELD?

Closings are usually held at a title company’s office (in Florida, it’s typical for the seller to choose the title company since they pay for the title insurance). Their job is to confirm the current legal owner of the property, reveal any mortgages, liens, judgments or unpaid taxes on the property, and identify any restrictions that may affect the sale of the property.Any problems need to be corrected before a buyer can receive “clear title.”

WHAT DO I NEED TO BRING?

Your Realtor can advise you on what you’ll need to bring to closing, but typically buyers must provide:• Payment of closing costs• Proof of insurance• Photo ID

WHAT HAPPENS AT CLOSING?
You’ll sign many documents. Rely on your Realtor to review these documents and answer any questions you may have. Frequently-used documents include:

Truth in Lending statement – a final summary of the terms of your loan

Mortgage note – a legal obligation to repay the lender according to stated terms

Deed of trust – the legal transfer of ownership; gives the lender a claim against your home if you fail to meet the terms of the mortgage note

Affidavits – any binding statements by the buyer or seller

Riders – any contract amendments that impact your rights

Any additional documents required in your state.

Once all documents are signed and all monies have been paid and dispersed, possession is transferred and you receive the keys to your new home. Be sure to keep your closing documents in a safe place for future reference. Some of the expenses associated with your home purchase are tax-deductible.

According to the latest housing data released by the Orlando Regional Realtors Association, Florida’s housing market continues to show growth and recovery. Since March of last year (2012), home prices in the Orlando area have increased by 21.74% to a median home price of $140,000. On a monthly basis, this number is up 5.26% from February 2013’s median price of $133,000.

“March marks the 15th consecutive month that the statewide median sales prices for both single-family homes and for townhouse-condo properties rose year-over-year,” said Florida Realtors President Dean Asher.

One of the main reasons for the jump in home prices is that the number of non-distressed “normal” home sales increased by nearly 50%. Another big driver of home prices is net migration. According to a recent blog by Investor Intelligence, the Orlando metro area grew by 50,000 people last year alone. In addition to this, the dwindling inventory of listings has had an effect on home prices. In March 2013, inventory was 19.95% less than it was in March 2012.

The number of existing homes available for purchase in Orlando is continuing its steady decline that began all the way back in July 2010 at 16,563 homes and is now at 6,937 homes. In March 2013, current inventory combined with the rate of sales created a 2.66-month supply of homes in Orlando, which can be compared with the 3.56-month supply in March 2012.